|YER - Yemeni Rial||277,796|
|ZAR - Rand||16,0434|
|ZMW - Zambian Kwacha||16,309|
|ZWL - Zimbabwe Dollar||357,302|
Do you frequently travel outside of the country, such as working during the week in the United States while you live in Canada? Or do you plan on taking a vacation very soon? Chances are that unless you are traveling to a country with a fixed-exchange-rate system for the U.S. dollar like the Bahamas or Belize, you will need to use their money to make your purchases. You can learn how to exchange your money for travel or online purchases by reading this article. We will also show you how to get the best price for your exchange, and explain how to use your most vital tool when exchanging money, the currency converter.
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What Is A Currency Converter?
In the internet age when buying a set of Russian dolls straight from Russia is as easy as clicking a button, currency converters have become absolutely essential. Whether we are traveling outside of the country or just shopping online outside of the country, we need to know exactly how many U.S. Dollars it takes to buy a euro, Russian ruble, British Pound or any other form of currency. This is called the exchange rate. A quality currency converter will show exactly how many U.S. Dollars you should be paying for that product so that you know you are getting a fair price. Many shopping sites will offer to do the conversion math for you, but it's best to double-check their math as the exchange rates fluctuate quite a bit.
How Does A Currency Converter Work?
Most currency converters come as cell phone apps or websites. The user plugs in the number of U.S. Dollars that they want to convert, then they select the currency that they are converting it to. For instance, say we want to convert 100 U.S. Dollars to euros. If we were to plug this information into an updated converter today, it would come out to be a little over 90 euros. It's much like using an online converter that changes meters to yards or inches to feet. A very good currency converter will allow you to choose from nearly any form of currency available in the world. It will also let you choose whatever currency you are converting from.
Of course, the number of inches in a foot or meters in a yard is constant. The exchange rates for our currency are anything but. In fact, they can fluctuate by the second. This is why a currency converter must be plugged into real-time market information. The current exchange rate for that currency will obviously affect the answer. Most market trade estimates have a small difference between the buying and selling prices for stocks, bonds, exchange-traded funds, etc. Most currency converters, however, will likely not show any difference between the buying and selling price for a currency. This is because they are basically used for estimating prices for products or for preparing basic reports and financial summaries.
How Precise Can They Be?
Some currency converters will display conversion rates up to the fifth decimal place. This is usually not necessary for basic calculations though. Two decimal places are usually sufficient. Even when converting from Dollars to Pounds, which usually fluctuate at a fairly close percentage between 70% and 120%, results of roughly two decimals are completely fine for basic tasks. You will probably want a much more precise converter if you are exchanging currency for a profit.
How Much And How Often Do Exchange Rates Fluctuate?
Exchange rates for currencies fluctuate constantly. This is partly because they are being bought and sold on the market by people who trade currencies for a living. Even relatively stable currencies that don't change very much because they aren't frequently traded will fluctuate in relation to the U.S. Dollar over time because the value of the Dollar goes up and down. It will change more slowly, but it will still change.
Why Does The Value Of A Currency Fluctuate So Much?
Most will say that the main reason currency fluctuates so much is simple supply and demand, and this is true to a certain extent. However, this supply and demand are controlled by several different forces, not just the currency market.
Currency purchase prices are based on something called a “flexible exchange rate.” This means that their prices change based on how much demand the currency has at the moment in the foreign exchange market. If a currency is wanted in large amounts by many different people and entities, then the price for that currency will increase. It also may increase if there is a shortage in availability of the currency. Currency shortages can be caused by two different factors:
First, a shortage may occur simply because it is highly in demand. (Think of how the price of certain toys may increase around Christmas time.)
Second, shortages in currency can also be artificially manipulated by the government or entity that controls the currency (or other entities).
Take the Federal Reserve for instance, which is in control of American Dollars. Say that they feel the price of the Dollar is too high compared to other currencies. They may feel that this is bad for the economy because the high price of the currency on the foreign exchange market will drive down demand for Dollars and keep foreign investors away. They may then tighten the supply of American Dollars using several different techniques, like printing less money and raising interest rates with American banks.
Of course, this is a very general oversimplification of how the Federal Reserve controls demand for and price of the Dollar, but it's enough to get the basic idea across. They also use tools like changing interest rate lending to large banks and taking certain actions in the bond market. If you are interested in learning more about how this works, this Forbes article is a very good start.
But the long story short is this: as the price of the American Dollar becomes “stronger” or “weaker,” the amount of other currencies required to purchase an American Dollar changes as well, and vice versa. There are quite a few people out there who make a pretty nifty living from capitalizing on these changes.
How Large Can These Fluctuations Be?
The above examples of controlled currency fluctuations don't necessarily take into account what can happen with uncontrolled market forces and currency crisis situations. Most fluctuations in currency exchange rates are subtle and take place over an extended period of time. For instance, the exchange rate between the American Dollar and the Canadian Dollar tends to only fluctuate in the tenth of a percentage point over the course of a one day period. Over time though, it can amount to quite a large difference. Anyone who traveled to Canada in 1998 would have had no problem convincing a shop owner to take American Dollars for their purchase. Why was this? Because the Canadian Dollar (A.K.A, the loonie--yes, that really is the nickname for their currency) was worth only $0.63 U.S. Dollars. So, they'd haggle a little about what the price should be in American Dollars since most people didn't have access to real-time currency converters on their smartphone at the time, and settle on a price. Usually, the shopkeeper came out quite a bit ahead.
Nearly ten years later in 2007, these same travelers would discover that this was no longer the case. Shopkeepers were turning their noses up at the skimpy U.S. Dollar because the loonie hit a high of $1.10. Meaning that if you wanted to buy something in a shop for U.S. Dollars instead of loonies, you'd have to pay a bit extra (and don't forget that pesky exchange fee.) Most just didn't want to bother because it was a pain to change money. So, truck drivers and others who frequently crossed the border simply made currency exchanges when they entered instead of trying to use their own money.
But this is still a very mild change over a long period of time. These mild changes represent a natural market force called depreciation. On the nastier side of the coin, a currency can also be deliberately devalued for various reasons. When this happens, the change is extreme. One interesting example is Zimbabwe's currency in 2008. Without getting into details of the politics involved, it was one of the largest overnight currency exchange changes in global history. On August 1, 2008, the central bank in Zimbabwe redenominated their currency in a failed attempt to stifle runaway inflation. It didn't work, and on February 2, 2009, their local currency (the ZWD) went from 3,429,836,806 per U.S. Dollar to 12,336,416,667 per U.S. Dollar. Granted, the currency wasn't worth much against the U.S. Dollar in the first place, but even the locals definitely felt it when their currency dropped in value more than 72% in one night.
One Man's Crash Is Another Man's Treasure
Of course, from great misfortune comes great opportunity. Anyone who is set up to take advantage of a situation like this can make a fortune. Currency traders generally make money by betting on how much a currency is going to change over a period of time. It's a lot like gambling unless you're George Soros betting against the Bank of England. Here is a basic explanation of the two main bets:
You can bet a currency will increase its value: If you believe a currency is going to gain value, then you'll do something called going long. This means you hold onto it because you know that its overall value will increase and therefore you will be able to buy more with it in the long run compared to other currencies.
You can bet a currency will lose value: This means that you are betting against it retaining its value compared to another currency. For instance, you might bet that a Dollar will lose value against a Pound. (Please keep in mind that this is an incredibly oversimplified explanation.) A Dollar is currently trading at 1:1 ratio to a Pound, meaning 1 Dollar will buy 1 Pound. So you buy 1,000 Pounds with 1,000 Dollars. Now you wait for the Dollar to lose value. 6 months later, it takes 2 Dollars to buy just 1 Pound. If you want to cash in on your bet, you just trade the Pounds back for Dollars and now you have 2,000 Dollars. It doesn't work exactly that way. Most people just trade in futures, but this is the basic drift.
But wait? If the Dollar lost that much value, won't it mean your money is worth half as much anyway?
Not quite. What you are betting on is global market forces versus internal market forces in a nation. You see, global currency prices don't affect internal prices within a nation's borders as much as you'd think. This is because local prices are dictated by what locals can afford to spend. Unless prices inside the country go up twice as much, say a loaf of bread now costs $2 instead of $1, you will have increased your buying power within that particular country's borders with this trade. Likely the price of bread went up a bit because of inflation, but unless everyone's salary went up twice as much in the meantime, the bread baker's wouldn't have anyone to buy their bread, so the price could only go up a little--perhaps a quarter or so but probably less. So, you've basically doubled your money for purchases within these particular borders.
If it sounds confusing, well, it is a bit. But, it leads to some very interesting travel opportunities. If you keep track of currency conversion rates around the world, you are able to plan your travel and vacations to go where you will get the most bang for your buck, so to speak. If the Dollar has suddenly become stronger against the Yuan, it might be a good time to vacation to China before local prices adjust. You can get some amazing travel bargains in this way!
Why Should You Use A Currency Converter?
Now we are back to the original question. Aside from the extreme examples listed above, why would one need a currency converter in the first place? Simple. If you have ever shopped on a site like Amazon, where you can purchase items from anywhere in the world, or traveled out of the country to a place where Dollars are not accepted, you are at the mercy of the money changers. Amazon has a built-in currency converter that buyers can opt to use instead of paying the price in the currently listed currency. Say, for instance, that you want to buy something from England, and you live in America. The item from England will be listed in British Pounds. You can choose to pay this price in Pounds, or you can use Amazon's currency converter to pay in American Dollars with your Visa or Mastercard. Why does that matter?
Because if you don't use the currency converter before you buy, you won't know how much you actually paid for the item in your own currency until you see it on your credit card statement.
Most of us can agree that it's important to know exactly how much we are spending for an item that we purchase overseas. But we are back to the basic problem at hand, which is being at the mercy of the money changer. You see, Amazon and other sites like it won't necessarily guarantee that they are giving you the best currency exchange rate. Both your banks and your credit cards might have slightly better or worse exchange rates for your currency choices available. This may not matter much on small ticket items. The difference may only be a Dollar or two. But, on large ticket purchases, this difference in the exchange rate can add up very fast. This is where using your own currency converter comes in handy, because you can double check the rate that the onboard currency converter is using at your purchasing website to ensure that you are getting the best rate. If not, then you can choose to use your credit card or bank's rate instead. This way, you know that you are getting the absolute best price for the product you're buying.
What If You Are Traveling?
There are quite a few places around the world that still happily take American Dollars for payment. But how will you know how much you should be paying in American Dollars if the price is in Mexican pesos? Most shopkeepers and restaurants in highly traveled areas that take American Dollars keep up with general currency exchange trends. Some even offer prices in both American Dollars and their own national currency. But we travelers should never simply take their word for it. Instead, you should double check the price in the local currency to ensure that there isn't a large discrepancy between the American Dollar price and the local currency price. After all, why should you pay more than everyone else? This keeps merchants honest and keeps you from getting ripped off.
It's important to remember that if there is a small markup difference between the American Dollar's price and the local currency price, that all merchants eventually have to change the American Dollars that they receive before they can use them at their own local shops, and there is always a fee for doing this. It's only fair not to expect them to absorb that cost. The same will go for a retail website's currency converter, your credit card and for your bank.
What Is The Usual Fee For Converting Currency?
Most currency exchanges do not charge a flat rate for exchanging money. Instead, they will charge you a percentage of the total transaction. The amount of this percentage can vary widely, so it's best to shop around and make sure you are getting the best rate. A typical rate for currency exchange is between 1% and 3%. For instance, if you are exchanging 100 American Dollars for Canadian Dollars and the fee is 3%, they will automatically keep $3 of your money before giving you the rest in Canadian cash. This is typically what a credit card will charge you for exchanging your currency. In fact, it's one of the cheapest ways to use your own currency in another country if you are working with retailers that take credit cards. Don't try to do this at an ATM to get cash, however. The fees can be positively outrageous. In some cases, you'll end up paying as much as 20% to withdraw local currency from a machine.
Where NOT to exchange your currency
We've all heard the phrase “tourist trap.” Well, in the case of currency conversion, when you make currency conversions in the following places it's doubly true:
These types of businesses thrive on travel, and they've learned how to make the extra buck from unwary travelers who aren't making daily use of a currency converter on their trip. There are often hidden fees in addition to the exorbitant exchange fee. You're likely to spend 20% of your money at the very least by using this route.
Also, don't try to withdraw from your bank at a local atm that is not affiliated. The fees can be even worse than what you will find at a hotel or airport. Instead, if your bank has ATMs where you are traveling and you are really in a pinch for cash, give your bank (again, NOT your credit card) a call and ask them what their exchange rates and fees are at local ATMs. You're likely to pay much less, even as little as 3% to 8%. (Don't forget to tack on the ATM fees.) If you are lucky enough to be a member of a bank like Bank of America or Citibank, they have ATMs all over the world where you can withdraw local money fee free. This is the best option of all.
What If I Have To Use One Of The Bad Options While Traveling?
This is where your currency converter will be most vital. As stated above, a lot of these travel traps will take advantage of the unwary and tack on fees to skim a bit extra from the transaction. Use your currency converter to see exactly what the current exchange rate is before making the transaction. Then have the customer service representative explain every fee that they are taking out of the transaction in detail while you show them what the exchange rate is so they will know that you are on your guard. This has saved many a smart traveler from being ripped off by an unscrupulous clerk.
Change Your Currencies At The Right Time To Save Money
Some currencies just seem to do better at certain times of the day. While these typical patterns aren't guaranteed, they do tend to be fairly stable. If you have the ability to exchange your currency during any time of the day with a currency exchange that honors real-time rates, you might want to consider keeping your eye on the currency converter throughout the day so that you can make the most of your trade. The Canadian, Australian and New Zealand dollars tend to have the highest values during the trading hours on the Asian market, meaning that they will be worth more for you during the nighttime hours in the Western nations. This is also true for the euro and the Japanese yen. You'll tend to see the most volatility in all currency prices during Fridays. You'll see the largest changes for the Australian dollar and the British pound during U.S. market trading hours.
These are just a few examples of relatively stable trading patterns that happen with the more popular currencies. Try keeping your eye on the price of a currency you know you will need to exchange for a couple of weeks before you travel or make an online purchase. If you notice a consistent pattern, you have the chance to figure out what day of the week and what time of the day you will get the best price for your trade.
How To Use Our Currency Converter
Say you are in Mexico, and you have some U.S. Dollars in your pocket. You see a wonderful handmade guitar at a local shop. Say the price is 800 Pesos. Just go to our currency converter. There are two drop-down boxes displayed. The top box is the currency you are exchanging from and the bottom box is the currency you are exchanging to. Simply select the Mexican Peso from the top box and input the amount of money. On the drop-down box underneath, select U.S. Dollar. (It's abbreviated USD and accompanied by the American flag to make your selection easier.) You will now see on the right side of these drop down boxes the amount that you chose to input as foreign currency and directly beneath it, the equivalent amount in U.S. Dollars.
Currently, the results will show you that the guitar according to the price listed above, in the middle of April 2017 is $40. If it plays good, that's a bargain for sure. Now you know that you are getting a good buy for your money because a basic handmade guitar made in the U.S. would cost upwards of hundreds of U.S. Dollars. You can use the tool in the same way for online purchases to make sure that the included currency converter for the website is remaining honest.
How Much Does This Currency Converter Cost?
Ok, so apparently every single currency conversion service costs money, right? NOPE! This currency converter is completely free! All you have to do is input your required information for the amount of currency you are converting from to find out the amount of currency you need to convert to, and you get the result completely for free. There are a lot of free online currency conversion services that will do the same thing, but they aren't necessarily free.
There is also an included calculator so you can use your computer's number pad if you need. Simply scroll down a bit below the drop down boxes and choose "show calculator" in the blue drop-down box.
Right below this is a current listing of the most popularly traded currencies that their general direction in the currency market. To the right of each currency are four columns that show whether the currency has been rising or dropping in value over the past few months. The columns are separated by changes per day, per week, per month and per year. There are literally dozens of currencies listed on this quick information chart, so it's easy to keep track of the general currency value direction in the most common countries from this chart.
Why It’s Important To Use A Currency Converter That Is Updated
Honestly, some currency converters are "lazy." If you are buying things online or even traveling, it's important to know the cost of your transaction at the moment it takes place. There are some currency converters out there that literally only update their prices once a month. Worse, they charge for membership to the site. This is not a good deal for someone who is doing their best to get a good price on all their international trades.
Ok, So Where Can I Get The Service For Free?
Our currency converter at the top of our page is completely free. Simply scroll to the top and you can find the latest currency rates for free, no strings attached. Our services have conversion rates for literally hundreds of currencies.
So, now that you know a bit more about how currency exchanges work, hopefully, you can get the best rate for your exchanges when you travel and shop. Don't forget to bookmark our currency converter on your smartphone too so you will always have this important information at your fingertips whenever, and wherever you need it. Also, feel free to check out this free Financial Independence Calculator by MoneyMowit's a great resource when it comes to personal finance. If you are looking for motivation, regarding your own finances, check out his blogposts and be inspired to start saving money and become financial independence sooner than you might think.